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Whirlpool Case’s $15 Million Fee Award Goes Before Ninth Circuit

Jan. 22, 2020, 9:56 AM

Defendants Whirlpool Corp. and Sears Holding Corp., nine state attorneys general, and three objectors want the Ninth Circuit to throw out a nearly $15 million attorneys’ fee award in a class settlement involving dishwashers that allegedly could catch fire.

The district court didn’t properly scrutinize class counsel’s fee request in the settlement and allowed a grossly disproportionate award, their attorneys are expected to tell the U.S. Court of Appeals for the Ninth Circuit at oral argument Jan. 23.

The settlement, which received final approval from the Central District of California in 2016, provides full reimbursement of repair costs for class members who experienced an overheating event; cash payment of $200-$300 for class members who replaced their dishwashers within 12 years of purchase; and future rebates for class members who want to buy a new dishwasher even though theirs hasn’t overheated. Some dishwashers are covered through 2021.

The Class Action Fairness Act requires fee awards in coupon deals to be calculated as a percentage of the coupons’ redeemed value, something not done here, Whirlpool, Sears, the AGs, and the objectors say.

Attorneys representing the class, meanwhile, are expected to downplay the coupon part of the settlement, arguing the settlement provides a number of other kinds of relief and, consequently, the judge didn’t have to just consider the coupons’ value.

Also, the fees are more than reasonable given the $78 million or more in benefits that consumers stand to gain from the deal as a whole, they say in filings.

Plaintiffs alleged their Whirlpool-, KitchenAid- and Kenmore-brand dishwashers had a circuit board defect that could cause the appliances to emit smoke and erupt in flames.

The settlement provides between $2 million and $5 million in relief, most of which is in coupon form, Whirlpool and Sears say.

Defendants Want Lower Fee

The district court allowed fees that dwarfed the settlement’s limited value to the class, the defendants say.

In granting the plaintiffs’ fee request, the court applied the “lodestar” method by taking the attorneys’ hourly rates and multiplying them by their hours worked to reach a total of about $9 million. It then applied a 1.68 multiplier to reach the $14.8 million award.

Properly calculated—as a reasonable percentage of the value of redeemed coupons plus the lodestar amount applicable to the settlement’s minuscule monetary relief—the fee award shouldn’t exceed $2.2 million, Whirlpool and Sears say in a brief filed to the appeals court.

Even if the appeals court were to find no error under the class action law, it still should reverse and remand with instructions that the fee be no more than $4.4 million to reflect the modest value of the settlement, the defendants say.

At a minimum, the court should reverse the multiplier, they say.

Objectors, State AGs: Toss Entire Deal

Despite their concerns about attorneys’ fees, Whirlpool and Sears say the rest of the settlement should be approved, describing it as “generous,” given the weakness of the plaintiffs’ claims.

Overheating is rare, and the Consumer Product Safety Commission investigated plaintiffs’ allegations and found them meritless, the defendants say.

Three objectors and a group of nine state attorneys general, meanwhile, criticize both the fees and the underlying settlement.

Christine Knott and two other objectors say lead plaintiff Steve Chambers’s interests aren’t aligned with those of the other class members. Chambers received an incentive to settle in the form of a $100,000 payment for the purchase of dishwasher fire-related websites he created after experiencing a problem with his unit, they say.

The AGs of Arizona, Idaho, Louisiana, Missouri, Nevada, North Dakota, Oklahoma, Oregon and Texas say the district court failed to follow CAFA’s requirement of heightened scrutiny for coupon deals.

These state AGs are following the lead of the U.S. Department of Justice, which has taken a more active role in scrutinizing class action settlements in recent years.

Plaintiffs: Not a Coupon Deal

On the other side, counsel for the plaintiffs are expected to tell the Ninth Circuit that CAFA’s scrutiny of coupon deals doesn’t apply to settlements, like this one, that provide multiple types of relief.

And the settlement’s estimated benefits exceed $78 million, which easily supports the $14.8 million fee award, the plaintiffs say in their filing.

The settlement is uncapped and provides consumers with what is tantamount to a full recovery of their economic damages, they say. It also provides substantial injunctive relief in the form of safety warnings about the dangers of disabling certain controls.

More than 26,000 consumers submitted claims for overheating events, seeking reimbursement for repairs or replacements. Those claims have an aggregate face value of nearly $10.9 million, the plaintiffs say.

And more than 13 million dishwashers were covered by an extended warranty, which plaintiffs’ expert valued at more than $50 million, according to the plaintiffs’ brief.

The fact that the settlement doesn’t include a full recall and disgorgement of billions of dollars, as sought, doesn’t justify a lower fee award, the plaintiffs say.

Mayer Brown represents Whirlpool and Sears. Chimicles Schwartz Kriner & Donaldson-Smith LLP and others represent the plaintiffs. The Bandas Law Firm PC and others represent the objectors. The Arizona Attorney General’s Office represents the AGs.

The case is Chambers v. Whirlpool Corp., 9th Cir., No. 16-56666, argument 1/23/20.

To contact the reporter on this story: Julie Steinberg in Washington at jsteinberg@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Steven Patrick at spatrick@bloomberglaw.com

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